One hundred specially-modified Chrysler Pacifica Hybrid
minivans equipped with Waymo's self-driving tech will hit U.S. streets early
next year. What does that mean for FCA?

By John Rosevear (TMFMarlowe) Dec 19, 2016 at 1:05PM

Fiat Chrysler Automobiles and Alphabet's Waymo unit
announced on Monday that they have completed production of 100 test vehicles to
be fitted with Waymo's prototype self-driving technology.

Waymo, of course, is the business formerly known as the
Google Self-Driving Car Project. The new vehicles, specially modified Chrysler
Pacifica Hybrid minivans, will represent a significant upgrade to Waymo's test
fleet as it moves from Google "moon shot" to a fully fledged business
under Alphabet's corporate umbrella.

What the companies said

In a joint statement, the companies explained that the
special Pacificas were created by a team made up of FCA and Waymo engineers
that came together earlier this year. The Pacifica Hybrids destined for Waymo
required modifications to the standard model's electrical, drivetrain, chassis,
and structural systems in order "to optimize the Pacifica Hybrid for
Waymo's fully self-driving technology," the companies said.

Waymo's new Pacificas aren't quite operational yet. The
companies said that the vans are currently being fitted with the purpose-built
computers, sensor arrays, telematics, and related bits that make up the
hardware components of the Waymo self-driving system. The new Pacificas are
expected to join Waymo's self-driving test fleet early in 2017.

What it means for Waymo

Unlike the famous Google "panda cars" that
served as the company's first purpose-built self-driving test vehicles, the new
Pacificas are capable of real-world, on-road operation in any climate.

And unlike the Toyota and Lexus test vehicles that
preceded the panda cars in the Google test fleet, the Pacificas have been
modified by the manufacturer for deeper integration with the Waymo system.
Inside and out, the Waymo system is much more deeply integrated with the
overall vehicle than in earlier test cars. And while Waymo's Pacificas
obviously look different from the standard production models, they have a much
more polished appearance.

That's a hint that Waymo is now thinking as much about
how to bring its system to market as it is about refining the system itself.

What it means for FCA

For FCA, working with Waymo was a chance to jump-start
its own technological efforts, which have fallen behind most big rivals'.

Unlike most of its global rivals, FCA has a very heavy
debt load -- it has more debt, in fact, than cash. On top of that, CEO Sergio
Marchionne has been pushing a series of aggressive product-revamp plans,
including an expensive relaunch of the upscale Alfa Romeo brand.

Taken together, it's clear why FCA has lagged behind its
rivals in electric cars and self-driving technology: It has had neither the
money nor the engineering time to commit to those kinds of long-term tech
research and development projects.

"Our partnership with Waymo enables FCA to directly
address the opportunities and challenges the automotive industry faces as we
quickly approach a future where fully self-driving vehicles are very much a
part of our daily lives," Marchionne said in Monday's statement.
Translation: Our work with Waymo is helping us get up to speed.

What's next for the partnership

At least in public, the partners haven't given any
indication that their partnership will extend beyond the completion of these
100 test vehicles. Waymo CEO John Krafcik's statement was noncommittal:
"[FCA's teams] have been great partners, and we look forward to continued
teamwork with them as we move into 2017," he said.

FCA is expected to show a fully electric version of the
Pacifica at the Consumer Electronics Show in Las Vegas next month. Electric
vehicles and self-driving systems often seem to go together. But how (and
whether) FCA's self-driving plans -- with or without Waymo -- fit together with
the battery-operated Pacifica remains to be seen.

Suzanne Frey, an executive at Alphabet, is a member of
The Motley Fool's board of directors. John Rosevear has no position in any
stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A
shares) and Alphabet (C shares). Try any of our Foolish newsletter services
free for 30 days. We Fools may not all hold the same opinions, but we all
believe that considering a diverse range of insights makes us better investors.
The Motley Fool has a disclosure policy.

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